It's 8:00 am on Monday morning and you are just returning from your vacation to the Bahamas.

"What a trip!!! The beach...The starlit nights...Man, if I could just live every day like that...", you relate to your co-workers. And why shouldn't you have had a great time? You worked for that vacation for two years. Planning every day where you would go, what you would do. You even had the money you needed because you saved for the trip!

This is not all that uncommon of a story. Every day, thousands of people are telling the truth, and maybe a few tall tales, to their co-workers about their vacation. It may not have been to the Bahamas. In fact, they may have gone nowhere, but they took their hard earned time off...

...and they did what they wanted to do...

...and they spent the weeks, maybe months, leading up to their time off planning it out.

Isn't it amazing? We can spend hours upon hours planning what we will do in our spare time, but we forget to plan how we will be able to afford that spare time.

We have spoken the last two months about the importance of planning for businesses in our General Business News, but what about personal financial planning? Isn’t that important, too?

Sure it is! In fact, personal financial planning may be more important than business planning. It does, after all, affect every aspect of your life, not just business.

If the truth were told, everyone does some form of financial planning. It's just that some people choose to do it very poorly (like they don't think about saving anything) and others do it very well. No offense to those whose plans are on the poor side, but we will concentrate on the planning that falls under the "well done" category.

First, why should you plan? After all, there is strong evidence that we are in the “last days” and the world will end soon. Why save money when it won't be needed? Either the world will be obliterated or we will all be in heaven. Either way, cash will be unnecessary.

You may laugh at this. You may even tell me that’s a stupid thing to say, but I have heard this from more than one person. If you think about it, such an attitude makes it easy to "eat, drink and be merry," as they say. The only problem is, a number of people in the first century A.D. thought the same thing. Their predictions weren’t very accurate. Why should yours be any better?

Assuming the "eat, drink and be merry" crowd is wrong, there are several reasons you should engage in financial planning and, yes, we are going to tell you what they are.

Cash Management

Cash management includes much more than making sure you don't bounce a check. It includes establishing a budget and following it. It includes determining how much credit you are comfortable with, can handle, and when to use it. Ultimately, it involves using your cash resources to 1) maximize your savings and, therefore your income, and 2) minimize the income tax you pay and when you pay it.

Risk Management

How much risk are you willing to take...with your life?

Risk management includes assessing the risk to property and, more importantly, loss of health or life. What would happen if you suddenly died in an accident or you could no longer work? How are you going to pay the bills?

In the space of a second, all your plans can change. Perhaps that beautiful child you thought you were having becomes the million-dollar baby due to a birth defect. Do you have enough health insurance to keep you from spending not only your retirement, but also your children's college funds?

All of these and more come under the heading of risk management.

Dedicated Funds

Over the course of your lifetime, it is likely you will have children and want to go on vacation. You may even want to take the children on vacation with you. If you have children, you will most likely want to help with their college education and maybe help them out later with the down payment on a house or follow that quaint custom of the parents paying for the wedding.

Believe it or not, you can probably achieve most, if not all, of these goals if you save for them. It's surprising what a little bit of money deposited month-in and month-out will grow to when you need it. These are the dedicated funds we are talking about. Those funds that will help you put your children through college and take them on those vacations you may wish you took when you were a kid.

Freedom to Just Say No

Care to guess what a lot of people believe is the only way they will be able to retire? If you guessed hard work, there were a good number of those people also, but many people feel they will have to win a lottery before they can retire.

The odds aren't in anybody's favor this retirement plan will work. However, slowly accumulating retirement funds through a disciplined plan will give you a great chance at a comfortable retirement. The retirement assets people have built up over the years are giving many people today the freedom to "Just Say No" to longer careers.

Estate Planning

If you develop a personal plan for no other reason, do it to achieve what most of us like to do best with our money - keep it!

We realize that the U.S. Congress has voted to do away with the estate tax. That's great, if they do it! Unfortunately, Congress frequently changes its mind. They've done it before. Why should now be any different?

The bill hasn't even been signed yet and it’s not likely the President will sign it. Even if he did, what's to say if he does sign it, another President won't change this President's decision.

Such are the perils of a democracy and that's ok, if you keep them in mind in your planning.

So...What Can You Do for Me?

You could go it alone in completing all of your financial planning steps. It would probably save you money. It would probably also cost you far more than it saved.

Do you know all there is to know about wills, powers of attorney, QTIPS, CRATS, CRUTS, life insurance, casualty insurance, so on?

If you're not familiar with all of the above and a few thousand other acronyms, don't worry, nobody is. That's why it is wiser to assemble a team of professionals to help you put your collective financial house in order. At a minimum, you need your insurance advisor, your attorney and your CPA. If you have a certified financial planner, that's great! He or she needs to come to the financial planning party too.

Even after you have your team assembled, you still need a leader. We aren't talking about you. Your job is to give overall direction by expressing your desires and goals. The team leader, or coordinator, is responsible for the day-to-day steps leading up to establishing your plan.

That's where a CPA can help. Your CPA is probably more familiar with your finances than any of the other professionals when the planning effort begins. Your CPA can provide input on your current tax situation as well as how to minimize future taxes. He or she can help you develop your budget and estimate your future income needs as well as educational needs.

Once your CPA has helped you analyze your current situation and pinpoint future goals, he or she can communicate your needs to other members of the team. How much life insurance do you need to protect your family if you die? That depends on what you are earning. The CPA will know that number.

How large of an estate do you have? Will trusts be necessary? After the initial planning process, your CPA will know that.

How should you allocate your investments and what separate funds do you need? Are there gifts to minors involved? Do you need more fixed income and less growth stocks, or is it the other way around? The CPA will be able to help the Certified Financial Planner in this area.

Finally, the one person who is almost certain to look at your finances year in and year out, assuming you don't fire him or her, is your CPA. Your CPA is the one who will prepare your tax return. That means your CPA will be updated on how the plan is working out at least once a year, and maybe more. He or she will know when it is time to call in the other team members to adjust the plan as necessary.

All in all, we CPAs are a pretty valuable resource - one you should use as often as you can. As part of the team, we know our limitations and when to have other professionals involved. As the leader of the team, we are in a better position to distinguish the role each advisor needs to take. Give us a call and let us help you make the most of your life.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.